Graphene Nanochem Regulatory News (GRPH)

For Immediate Release 14 November 2016

Graphene NanoChem PLC

("Graphene NanoChem", the "Company" or the "Group")

Interim results for the six months ended 30 June 2016

Graphene NanoChem (AIM: GRPH), the international provider of nanotechnology performance enhancing solutions for global industries, announces its unaudited interim results for the six months ended 30 June 2016.

Financial Highlights:

· Gross revenue decreased to £0.9m (2015: £7.0m)

· Gross profit of £0.2m (Gross loss 2015: £0.2m)

· Loss before tax of £1.5m (2015: £3.7m)

· Loss of 1.43p per share (2015: 3.26p)

· Cash and cash equivalents at the end of the period was £0.6m

Key Highlights:

· The ongoing corporate and debt restructuring exercise will, assuming successful completion, ensure no repayments to financiers until 2019 enabling cash flow from operations to be utilised for business growth

· Two technology platforms enable the production of potentially "game changing" applications that are scalable

· Two new divisions to complement the Nanofluids division for growth, namely the Water & Polymer divisions with current and identified projects

· Best in class partnerships have been established for implementation of current and identified projects

Operational Highlights:

· The Group announced on 11th April 2016 its business reorganization strategy, which is ongoing

· The Group has made good progress on its debt rationalization plan with its Financial Institutions (FI) that will, assuming successful completion, significantly reduce its debt balance and interest rate expense in the future, which will have a positive impact of strengthening the Group's balance sheet and enable utilization of operating cash flows in the near term for advancement of the recalibrated business plan rather than repayment of debt

· The Group has exited the low margin fuel additive and crude palm oil (CPO) refining businesses (non-core businesses)

· In line with the business reorganization and the exit from the non-core businesses, two subsidiaries of the Group, namely Platinum Nanochem Sdn Bhd and Platinum Green Chemicals Sdn Bhd, are in the process of being wound up

· Strategic focus by the Group is currently on the three high margin platforms, the nanofluids (oil field chemicals) and water treatment, and enhanced building materials offerings with strategic partnerships and alliances entered into and efforts are continuing in building other long term sustainable partnerships and alliances.

Outlook:

Nano fluids

· The Group intends to leverage on its 50/50 joint venture with the Scomi Group, the 6th largest oil field services provider globally and which has presence in 48 locations and 22 countries, specifically within the nano fluids offerings namely the Drilling Solutions, Treatment Solutions, and Recovery Solutions within the oil field chemicals sector.

· Focus markets for the oil fields chemicals in the near term is the Middle East and North Africa markets (MENA) with continued efforts in South East Asia

· A key are of focus is the area of Recovery Solutions where the Group is able to provide solutions that increase oil well production by a minimum of 20%

· The Recovery Solutions business model is based on a profit sharing arrangement that allows for high returns and is scalable with the initial roll out of this business model targeted in Asia

Water Treatment

· Within the Water Treatment offerings the Group is able to source, treat and distribute water in a cost effective manner. Current focus sectors are clean drinking water, desalination, processed & produced water, and sewage & waste water treatment

· The Group is focused on a niche range between US$50m to US$150m, where the Group's decentralized solutions are economically viable and cost competitive

· During the final quarter of 2016 and the 1st quarter of 2017, the Group has identified a pipeline of major projects in Asia, Middle East, and Africa that it will be tendering/participating in and via existing partnerships

· To enhance the Group's water offerings, the Group has entered into strategic alliances including one with Tecnoconsult a leading global engineering firm for the roll out of the Group's solutions. The Group continues to focus on establishing strong partnerships with reputable partners for long term benefit

Enhanced building materials

· Part of the Polymer division of the Group, the enhanced building materials will be rolled out in 2017 through partnerships

· The group will be focused on affordable high quality structures - homes, buildings, warehouses, cold rooms etc.

· The enhanced building materials offerings are c.30% cheaper than traditional brick and mortar structures, prefabricated ensuring flexibility and quick assembly

· The Group is targeting African and Asian markets

Financial & Share Suspension

· Anticipate completion of business reorganisation and debt restructuring plan with FIs by year-end, in conjunction with an intended fundraise in the near future to strengthen the Group's financial position and remain a going concern.

· The Company's shares will remain suspended from trading on AIM pending clarification of the Group's financial position

Jespal Deol, Chief Executive Officer of Graphene NanoChem, commented:

"The Group remains focused in adapting to the macro-economic environment of prolonged lower oil prices that has impacted the Group's performance for the period however we have made significant progress in business reorganisation, debt rationalisation and reducing our cost base. Significant progress has been made with the debt rationalisation with our financial institutions which will reduce our cash outflow as we focus on progressing our business diversification efforts in the water and enhanced building materials sectors. We are optimistic that the industry partnerships and pipelines that have been established will advance the commercial applications of our nanofluids, water and building material solutions worldwide. This places us on a positive footing for realizing potential value creating projects for the Group in the near term and we hope to update the market in due course. In the meantime, a successful fund raise in the near future remains a priority to strengthen the Group's financial position to complement the debt rationalisation plan and to remain a going concern.

I believe that, whilst there are many challenges that we will continue to overcome, we are now entering into a new phase of development for the Group and the Board and I would like to thank all of our shareholders for their support."

The information communicated in this announcement is inside information for the purposes of Article 7 of Market Abuse Regulation 596/2014 ("MAR").

About Graphene NanoChem

Graphene Nanochem plc is a graphene commercialisation company that designs, formulates and markets a range of graphene‐enhanced applications, from chemicals to performance materials, with improved performance characteristics when compared to conventional products. The Group is strategically focused in the oil and gas sector as its first commercialisation platform and has successfully completed an integrated suite of enhanced oil recovery applications to meet industry demand for cost effective high performance solutions, achieving market breakthrough in 2014. With that, the Group is now moving onto its next phase of development of market building and executing long-term growth opportunities in the oil and gas industry and now in the water treatment business.

Headquartered in Malaysia, Graphene Nanochem was admitted to the AIM of the London Stock Exchange on 26 March 2013, following the reverse acquisition of Biofutures International plc, and trades under the symbol GRPH.L.

To find out more, please visit www.graphenenanochem.com.

Chief Executive Officer's Statement

Business Overview

2016 is our business reorganisation year

Debt rationalization plan

The Group has undertaken the following rationalisation with all its financial institutions (FI's). The plan was undertaken with all the Groups FI's addressing total borrowings during the tumultuous period for the oil and gas industry with falling oil prices and uncertainty surrounding companies within the industry. It's a testament to the Group and its reorganized business plan that the Group's FI's have engaged and approved a debt rationalization plan that meets its requirements for sustainable growth.

Note that all Sterling debt figures in the description below have been calculated on the basis of exchange rates as at 30 June 2016.

1) Primary short term debt financier - Malaysian Debt Ventures Berhad (MDV)

£17.2 million or 57% of the Groups FI debt is to MDV. The Group has restructured the short term debt into a seven year long term debt schedule as follows with customary conditions precedent to be met;

a) A two (2) year payment moratorium up to 31 December 2017;

b) An extended maturity date from November 2015 to December 2021; and

c) A pay down in the aggregate amount of £340,000 only in 2016 and 2017 respectively.

The Group has made the repayment of £340,000 for 2016 and the successful restructuring bodes well for the Group as the moratorium of payment and long-term repayment schedule enables the Group to utilise operating cash flows for advancement of the Group's businesses rather than payment of debt in the near term.

2) Primary long term debt financier - Bank Pembangunan Malaysia Berhad (BPMB)

In lieu of the Group's exit from the fuel additive business, non-core assets of the fuel additive business are in the process of being sold for repayment of £10.9 million or 36% of FI debt.

Accordingly during the period, BPMB appointed Messrs. KPMG to act as Receiver Managers for the process under a wholly owned subsidiary of the Group namely Platinum Green Chemicals Sdn Bhd.

In view of the exit from the fuel additive business, the directors deemed it prudent to write down the asset values to force sale value as determined by a prominent valuer approved by BPMB.

The assets as determined by the valuer have a force sale value of £15.5 million providing 1.4 times cover over the debt to BPMB

Similarly to the restructuring of the MDV debt, the repayment of debt to BPMB via the proceeds from the sale of non-core assets will alleviate cash flow constraints for the Group whilst focusing the operating cash flows for advancement of the Group's businesses.

3) Secondary long term debt financier - Bank Kerjasama Rakyat Malaysia Berhad (BKRMB)

With the Group's exit from the crude palm oil (CPO) refining business, the Group has been in engagement with BKRMB in negotiating for the £2.0 million or 7% of FI debt to be repaid via the sale of the non-core assets of the CPO refining business.

To date, the respective parties are negotiating a settlement arrangement that amongst others provides the Group a window of 12 months for the sale of the assets prior to repayment of outstanding debt.

In view of the exit from the CPO refining business, the directors deemed it prudent to write down the asset values to force sale value as determined by a prominent valuer approved by BKRMB.

The assets, as determined by the valuer, have a force sale value of £6.0 million providing 3 times cover over the debt to BKRMB.

The Group is confident that a settlement arrangement can be concluded in the final quarter of 2016.

Nano fluid Offerings (Oil field Chemicals)

Via the joint venture with the Scomi Group, the 6th largest oilfields services provider globally, the Group intends to focus on 3 specific solutions that have been field tested, proven, and registered. With an end-to-end solution complete the Group is ready to capitalise on an industry snap back whilst focusing on key areas of the industry where its solutions provide immediate cure to pain points currently facing the industry;

1) Drilling Solutions

With gross margins of c.20%-25%, and up to 40% cost reduction to clients, the products have been sold within South East Asia in 2014 and 2015. As the oil and gas momentum recovers worldwide, the Group will focus on the Middle East and North Africa (MENA) where drilling activity continues unabated.

2) Treatment Solutions

With gross margins of c.20%-25%, and up to 30% cost savings to clients, sales will be focused on Scomi's current order book and the Group will continue product development for bespoke solutions to customers.

3) Recovery Solutions

With gross margins above 75%, and minimum 20% recovery improvement, this is the current focus of the Group within the nano fluid offerings. The business model for this offering is based on a profit sharing arrangement with the end client on access recovery from oil wells. This platform solution offered enables enhanced recovery for mature oil wells for cost effective returns to customers, at zero cost. The Group has identified a potential partner with access to c. 5,000 mature oil wells in the Middle East for the launch of the recovery solutions business.

This is an exciting area for the Group for the potential quantum leap in earnings. With current established recovery improvement rates achieved by the group in access of 20%, the Group is confident of achieving an improved average recovery rate of 20%.

Water Treatment Offerings

The water treatment offerings are targeted for the oil and gas, municipal, energy, mining and minerals, and agricultural sectors where the Group intends to deliver cost reduction solutions to customers.

The Group's solutions are based on low capital expenditure and operational expenditure through the utilization of nano technology. These elements provide high gross profit margins c.30% for direct sale of water treatment facilities and enable higher Internal Rate of Returns (IRR's) for Build Operate Transfer (BOT) projects with concession periods of 20 plus years.

The strategy for the water solution offerings is based on solid partnerships. These partnerships will enable execution of the projects in a timely manner, system integration for bespoke offerings, and off balance sheet financing due to the sheer size of the projects identified.

The targeted projects are within the band range of USD50m to USD150m with focus on the following areas:

1) Clean drinking water

The Group provides a disruptive offering based on a decentralised solution as opposed to the current common market practice of a centralized system. The Group's decentralized offering is typically cheaper due to advancement in the Group's platform technology, enables faster installation to meet current needs, and accommodates bespoke settings for differing needs within a project roll out.

GNC plans to offer the disruptive solution to targeted regions specifically Asia and Africa.

2) Desalination

The Group is focusing to provide desalination water offerings in partnership with a leading company within this area. The proposed partnership will enable the projects to be funded off balance sheet for the Group.

The targeted desalination projects will be based on a BOT basis that will ensure a long term stream of earnings through concession periods of c.20 years.

3) Process and produced water

Through the joint venture with the Scomi Group, the treatment of process and produced water from the oil and gas industry is a targeted area. GNC revenue model will be based on one off sales of its water solution systems, BOT, and leasing models. Scomi's is in the business of providing treatment services within the industry and the water offering will extend its holistic solution to end clients.

The Group will focus on opportunities in the Middle East and North Africa in the near term.

4) Sewage and waste water treatment

GNC has entered into an alliance with Millennium Engineering Corporation (MEC). MEC is one of the few Malaysian based companies that possess the requisite knowledge to Design, Engineer & Construct specialty process water and waste treatment plants in Malaysia.

MEC possesses extensive experience in design engineering, procurement and construction management of over 60 projects in the Malaysian market.

The strategic partnership with MEC enables the Group to offer treatment solutions within the targeted markets of Asia, Africa, and the Middle East.

To ensure delivery of the targeted projects within the water offerings, the Group has entered into an alliance with Technoconsult a leading global engineering company. Headquartered in Venezuela, with offices in Dubai and Uzbekistan, Tecnoconsult are specialized in providing multidisciplinary engineering, project management, procurement, and construction management services.

Technoconsult has 5 decades of global experience with over 1,550 projects executed and over 50 million man-hours in engineering and construction management. It has proven experience to ensure delivery of projects on time and within budget.

Technoconsult has extensive experience in design engineering, procurement and construction management of over 50 water treatment facilities all around the world.

The Group proposes to tap into these new and up and coming markets using Joint Ventures with reputable & capable local partners within the respective jurisdictions.

The benefits of this business model are:

1) It's easy to form

2) Offers immediate access to new markets

3) Enables the Group to leverage on local partners facilities enhancing delivery timelines

4) Enables leverage on local partners knowledge of local laws, compliance and access to key figures with the customer

Enhanced building materials offering

Part of the Polymer division of the Group, the enhanced building materials will be rolled out in 2017 through identified partnerships.

The Group will be focused on affordable high quality structures -homes, buildings, warehouses, cold rooms etc.

The enhanced building materials offerings are c.30% cheaper than traditional brick and mortar structures, prefabricated ensuring flexibility and quick assembly. The Group is targeting African and Asian markets.

Reorganization of the Group

In conjunction with the reorganization of the Group, the Group is currently in the process of winding up 2 non-core subsidiaries namely Platinum Nanochem Sdn Bhd and Platinum Green Chemicals Sdn Bhd;

1) Platinum Green Chemicals Sdn Bhd (PGC) winding up

In line with the business reorganization plan, KPMG Deal Advisory Sdn. Bhd. was appointed as receivers and managers of Platinum Green Chemicals Sdn. Bhd. The appointment was made by the BPMB vide the Security Deed and Debenture held and pursuant to Sections 188(1), 189(1) and 189(2) of the Malaysian Company Act 1965. Subsequent to this a further winding up order for PGC via Section 218 of the Malaysian Companies Act 1965 was received on 1 August 2016.

2) Plantinum Nanochem Sdn Bhd (PNC) winding up

On 15 July 2016, a winding up order was received for Platinum Nanochem Sdn. Bhd., a wholly owned subsidiary of Graphene Nanochem Sdn. Bhd. pursuant to Section 218 of the Malaysian Companies Act 1965.

The winding up of PNC would ensure the transfer of the debt from our primary short term financier, Malaysian Debt Ventures (MDV), to Platinum Techsolve Sdn Bhd, the Group's new wholly-owned subsidiary, and successful completion of the primary condition precedent for the novation of the loan.

Financial Overview

The Group revenues for the period decreased 88% to £0.9m (2015: £7.0m). The Group anticipated the decline in revenues for the period in line with the overall rationalisation and streamlining of its business to concentrate on higher margin nano fluid (oil field chemicals) offerings within the oil and gas industry and embark on new water treatment offerings.

The Group's exit from the capital intensive low margin fuel additives business, undertaking of the ongoing debt rationalization plan and stringent cost cutting measures have resulted in a leaner and more flexible business primed for growth.

The Group continues its growth through the establishment of strategic ventures and alliances with reputable and capable parties both from a global perspective and local perspective in relation to specific projects and its locality.

The partnership strategy is important in implementing the near term growth plans of the Group as these identified partnerships and alliances enable the Group to leverage the balance sheet of its partners for off balance sheet financing.

The joint venture with the Scomi Group provides access to its current order book as the Group seeks to grow its business within the drilling, treatment, and recovery solutions. The current arrangement with Scomi for advance payment on orders, provides GNC with the necessary working capital thereto.

Gross profit for the period was £0.2m (gross loss 2015: £0.2m) reflecting the success of the business reorganization despite lower revenues for the period in which the Group has been undergoing its holistic business reorganization.

Operating expenditure for the period was £1.6m (2015: £3.4m) a 53% reduction yoy, and Administrative expenditure for the period was £0.6m (2015: £1.3m) a 54% reduction yoy. This is based on stringent cost cutting measures undertaken by management inclusive of the exit from the non-core businesses namely the fuel additive and CPO refining businesses.

The net asset position of negative £11.7m was mainly due to impairments carried forward during the previous years. As announced in April 2016, the Group's debt restructuring plan and rescheduling of payments is a prime element of the Group's capital management plan and will align the Group's debt maturities with its current business plans.

Cash and cash equivalents at the end of the period was £0.6m (2015: £1.2m). Prudent measures such as cost cutting targets have been undertaken during the period to conserve cash prior to the corporate restructuring options that are available to the Group in the near term that include debt rescheduling, and the raising of additional funds from the capital markets in order to remain trading as a going concern.

The total comprehensive loss for the period was £1.6m (2015: £3.8m).

Notwithstanding the Group's current cash position, the future prospects of the Group are robust as the Group moves from its business reorganization phase to new business implementation phase. The high margin business platforms sought within the nano fluids, water and enhanced building materials offerings, through strategic partnerships and alliances bodes well for the future growth of the Group.

The Company will update on the status of the trading suspension in due course.

Condensed Consolidated Statement of Comprehensive Income

Condensed Consolidated Statement of Financial Position

Consolidated Statement of Changes in Equity

Unaudited six months ended 30 June 2016

Unaudited six months ended 30 June 2015

Year ended 31 December 2015

Consolidated Statement of Cash Flows

Notes to the Financial Statements

For the year ended 31 December 2015

1 Basis of preparation

These unaudited interim consolidated financial statements (the "interim financial statements") of the Group are for the six months ended 30 June 2016. They have been prepared using the recognition and measurement principles of the International Financial Reporting Standards (IFRS) as adopted by the European Union (EU). IFRS include interpretations issued by the International Financial Reporting Interpretation Committee (IFRIC). They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 December 2015.

The interim financial statements have been prepared under the historical cost convention. These interim financial statements have been prepared in accordance with the accounting policies of the Group's consolidated financial statements for the year ended 31 December 2015. The accounting policies have been applied consistently throughout the Group for the purpose of preparation of the interim financial statements. The financial information contained in these interim financial statements comprises the Group statement of financial position as at 30 June 2016 and 30 June 2015 and the Group statement of comprehensive income, the Group statement of cash flows and the Group statement of changes in equity for the half years ended 30 June 2016 and 30 June 2015.

These interim financial statements are presented in Pounds Sterling ("£") which is the functional and presentation currency of the parent, and rounded to the nearest thousand ("£'000"). The functional currency of the subsidiaries is the Malaysian Ringgit as that is the currency of their primary economic environment. The directors have chosen to present these financial statements in Pounds Sterling due to the international exposure and shareholders of the entity.

2 Income Tax

There was no tax charge due to the losses arising in the period

3 Net exchange differences on translating foreign operations

Income and expenditure for overseas subsidiaries are included based upon average exchange rates to give a fair approximation to the transaction rate. Balance sheet items are included at the exchange rate at the balance sheet date. All other differences are included within the translation reserve, including related goodwill and intangible assets, which are translated at the rate ruling at the balance sheet date (30 June 2016 £1 = RM 5.3910, 31 December 2015 £1 = RM 6.3607 and at 30 June 2015 £1= RM 5.9313).

4 Availability of half yearly report

The Company's half yearly report will be available in soft copy from the investors' section of the Company's website (http://www.graphenenanochem.com).

5 Loss per share

Basic

Basic loss per share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year.

Diluted

Diluted loss per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all contracted dilutive potential ordinary shares. The Company doesn't have any dilutive potential ordinary shares at the reporting date.

According the diluted loss per share is the same as the basic loss per share.

6 Material subsequent events

There are no material event subsequent to the end of the financial period that has not been reflected in the financial statements.

7 Changes in composition of the Group

During the six month financial period, in line with the holistic business rationalisation plan announced on 11 April 2016, to date the following changes were effected:

i) Platinum Green Chemicals Sdn. Bhd.

Platinum Green Chemicals Sdn. Bhd. is a wholly owned subsidiary of Platinum Nanochem Sdn. Bhd., which in turn is a wholly owned subsidiary of Graphene Nanochem Sdn. Bhd. The Company's core operations are in the discontinued fuel additive business.

On 11 July 2016, KPMG Deal Advisory Sdn. Bhd. was appointed as receivers and managers of Platinum Green Chemicals Sdn. Bhd. The appointment was made by Bank Pembangunan Malaysia Berhad vide the Security Deed and Debenture held and pursuant to Sections 188(1), 189(1) and 189(2) of the Malaysian Company Act 1965. Subsequent to this appointment, a winding up order for Platinum Green Chemicals Sdn. Bhd. via Section 218 of the Malaysian Companies Act 1965 was received on 1 August 2016.

ii) Platinum Nanochem Sdn. Bhd.

Platinum Nanochem Sdn. Bhd. a wholly owned subsidiary of Graphene Nanochem Sdn. Bhd. and parent company of Platinum Green Chemicals Sdn. Bhd. and Platinum Nano G Sdn. Bhd. The Company's core operations are in the discontinued fuel additive business.

On 15 July 2016, a winding up order was received for Platinum Nanochem Sdn. Bhd. pursuant to Section 218 of the Malaysian Companies Act 1965.